RBA awaits data before considering rates

Next week's March quarter inflation figures are building up to be a crucial set of numbers for borrowers hoping for another official interest rate cut by the central bank.

The Reserve Bank of Australia (RBA) kept the official interest rate at 4.25 per cent at its April board meeting but indicated that there could be a rate cut as early as May.

The RBA board thought it wiser to wait to see what the latest inflation data says before cutting the cash rate.

The Australian Bureau of Statistics will release consumer price index (CPI) inflation data for the March quarter on April 24, a week before the RBA's next board meeting.

The central bank's decision was made despite the pace of global economic growth being slower than expected.

In the minutes of its April 3 board meeting, released on Tuesday, the RBA acknowledged growth for the global economy was expected to be at a below-trend pace in 2012 because of ongoing economic weakness in Europe and a slowing of growth in China.

"However, growth in Australia's major trading partners, weighted by shares of merchandise exports from Australia, was expected to be around average in 2012,"" the RBA minutes said.

The central bank said a case for a rate cut could be made if slower growth in demand could be expected to result in a more moderate inflation outcome.

The RBA cut the cash rate by a quarter of a percentage point in November and December, citing concerns over the impact of Europe's sovereign debt crisis.

However RBA board meeting minutes said financial market sentiment had improved in recent weeks as fears about the European government debt crisis eased.

HSBC chief economist Paul Bloxham said although growth was a bit lower than expected, the central bank didn't feel any urgency to cut.

"As we have said before, if Australia had a monthly CPI they may have already cut rates," he said.

"It appears they think demand is low enough, and their inflation outlook is low enough to allow them to adjust rates, but they don't feel any urgency, and they'd rather wait for confirmation that inflation is low enough before they actually move."

RBC Capital Markets senior economist Su-Lin Ong said the minutes provided no indication as to whether the RBA was considering more than one rate cut.

"As always they leave the door open, it doesn't rule out more than one cut at some point and I think they will continue to look at a range of factors.

"But clearly the bias to ease is there and it could imply more than one cut depending on how the economy responds and I think we need to wait for the next range of data and the first one is obviously the inflation data."